Office of Public Sector Information
PART III continued
(1) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where—
(a) the obligation to make the repurchase is not performed or the option to repurchase is not exercised;
(b) provision is made by or under any agreement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
(c) provision is made by or under any agreement for any securities to be treated as not included with securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
(d) provision is made by or under any agreement for the sale price or repurchase price to be determined or varied wholly or partly by reference to fluctuations, occurring in the period after the making of the agreement for the original sale, in the value of securities transferred in pursuance of that sale, or in the value of securities treated as representing those securities; or
(e) provision is made by or under any agreement for any person to be required, in a case where there are any such fluctuations, to make any payment in the course of that period and before the repurchase price becomes due.
(2) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases where—
(a) arrangements, corresponding to those made in cases involving an arrangement for the sale and repurchase of securities, are made by any agreement, or by one or more related agreements, in relation to securities that are to be redeemed in the period after their sale; and
(b) those arrangements are such that the person making the sale or a person connected with him (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will accrue from their redemption.
(3) The Treasury may by regulations provide that section 730A is to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where there is an agreement relating to the sale or repurchase which is not such as would be entered into by persons dealing with each other at arm’s length.
(4) The powers conferred by subsections (1) and (2) above shall be exercisable in relation to section 263A of the 1992 Act as they are exercisable in relation to section 730A of this Act.
(5) Regulations made for the purposes of this section may—
(a) make different provision for different cases; and
(b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.
(6) The supplementary, incidental and consequential provision that may be made by regulations under this section shall include—
(a) in the case of regulations relating to section 730A, provision modifying subsections (3)(b), (9), (11)(c) and (11A) of section 737C; and
(b) in the case of regulations relating to section 263A of the 1992 Act, provision modifying the operation of that Act in relation to cases where by virtue of the regulations any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
(7) In this section “modifications” includes exceptions and omissions; and any power under this section to provide for an enactment to have effect with modifications in any case shall include power to provide for it not to apply (if it otherwise would do) in that case.
(8) References in this section to a case involving an arrangement for the sale and repurchase of securities are references to any case where—
(a) a person makes a sale of any securities under any agreement (“the original sale”); and
(b) that person or a person connected with him either—
(i) is required under that agreement or any related agreement to buy them back; or
(ii) acquires, under that agreement or any related agreement, an option to buy them back.
(9) Section 730B shall apply for the purposes of this section as it applies for the purposes of section 730A.”
(2) In section 182(1) of the [1993 c. 34.] Finance Act 1993 and section 229 of the [1994 c. 9.] Finance Act 1994 (powers to modify provisions relating to Lloyd's), the following paragraph shall be inserted, in each case, after paragraph (c)—
“(ca) for modifying the application of this Chapter in relation to cases where assets forming part of a premiums trust fund are the subject of—
(i) any such arrangement as is mentioned in section 129(1), (2) or (2A) of the Taxes Act 1988 (stock lending etc.); or
(ii) any such arrangements or agreements as are mentioned in section 737E(2) and (8) of the Taxes Act 1988 (sale and repurchase of securities etc.);”.
(1) In subsection (1) of section 129 of the Taxes Act 1988 (description of stock lending arrangements)—
(a) for “subsection (4)” there shall be substituted “subsections (2B) and (4)”; and
(b) the words “has contracted to sell securities, and to enable him to fulfil the contract, he” shall be omitted.
(2) In subsection (2A) of that section, for “A to fulfil his contract” there shall be substituted “B to make the transfer to A or his nominee”.
(3) After subsection (2A) of that section there shall be inserted the following subsection—
“(2B) Except in so far as the Treasury by regulations otherwise provide, this section applies only if A enters into the arrangement mentioned in subsection (1) above to enable him to fulfil a contract under which he is required to sell securities.”
(4) After subsection (4) of that section there shall be inserted the following subsections—
“(4A) Regulations under subsection (4) above relating to section 271(9) of the 1992 Act may include provision modifying the operation of that Act in relation to cases where, by virtue of the regulations, any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
(4B) In such cases as the Treasury may by regulations provide, this section shall have effect as if references to a transfer of securities of the same kind and amount as those subject to a previous transfer included references to the grant of equivalent rights in respect of benefits accruing from the redemption of securities of the same kind and amount.”
(5) For subsection (9) of section 271 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (exemption for arrangements to which section 129 applies) there shall be substituted the following subsection—
“(9) Subject to any regulations under subsection (4) of section 129 of the Taxes Act, any disposal and acquisition made in pursuance of an arrangement mentioned in subsection (1), (2) or (2A) of that section shall be disregarded for the purposes of capital gains tax unless it is one in the case of which subsection (2B) of that section has the effect of preventing that section from applying.”
(1) In Chapter VIII of Part IV of the Taxes Act 1988 (provisions relating to the Schedule D charge: miscellaneous and supplementary provisions), after section 129 insert—
The provisions of Schedule 5A have effect with respect to the tax treatment of interest earned on cash collateral provided in connection with certain stock lending arrangements.”.
(2) In the Taxes Act 1988 insert as Schedule 5A the provisions set out in Schedule 19 to this Act.
(3) This section and that Schedule apply in relation to approved stock lending arrangements (within the meaning of that Schedule) entered into after the passing of this Act.
(1) In section 481(4) of the Taxes Act 1988 (meaning of “relevant deposit” for the purposes of provisions relating to the deduction of tax), after paragraph (c) there shall be inserted “or
(d) any interest in respect of the deposit is income arising to the trustees of a discretionary or accumulation trust in their capacity as such;”and for “subsection (5)” there shall be substituted
(2) After subsection (4) of section 481 of that Act there shall be inserted the following subsection—
“(4A) For the purposes of the relevant provisions a trust is a discretionary or accumulation trust if it is such that some or all of any income arising to the trustees would fall (unless treated as income of the settlor or applied in defraying expenses of the trustees) to be comprised for the year of assessment in which it arises in income to which section 686 applies.”
(3) In section 481(5)(k) of that Act (declaration by virtue of which deposit is not a relevant deposit)—
(a) the word “that” before sub-paragraph (i) shall be omitted;
(b) in sub-paragraph (i), at the beginning there shall be inserted “in a case falling within subsection (4)(a) or (b) above, that”;
(c) in sub-paragraph (ii), after “above” there shall be inserted “, that”; and
(d) after sub-paragraph (ii) there shall be inserted the following sub-paragraph—
“(iii) in a case falling within subsection (4)(d) above, that, at the time when the declaration is made, the trustees are not resident in the United Kingdom and do not have any reasonable grounds for believing that any of the beneficiaries of the trust is an individual who is ordinarily resident in the United Kingdom or a company which is resident in the United Kingdom.”
(4) After subsection (5A) of section 481 of that Act there shall be inserted the following subsection—
“(5B) In a case falling within subsection (4)(d) above, a deposit shall not be taken to be a relevant deposit in relation to a payment of interest in respect of that deposit if—
(a) the deposit was made before 6th April 1995; and
(b) the deposit-taker has not, at any time since that date but before the making of the payment, been given a notification by the Board or any of the trustees in question that interest in respect of that deposit is income arising to the trustees of a discretionary or accumulation trust.”
(5) In section 482(2) of that Act (contents of declaration under section 481(5)(k)), for paragraph (a) there shall be substituted the following paragraph—
“(a) if made under sub-paragraph (i) or (iii), contain an undertaking by the person making it that where—
(i) the individual or any of the individuals in respect of whom it is made becomes ordinarily resident in the United Kingdom,
(ii) the trustees or any company in respect of whom it is made become or becomes resident in the United Kingdom, or
(iii) an individual who is ordinarily resident in the United Kingdom or a company which is resident in the United Kingdom becomes or is found to be a beneficiary of a trust to which the declaration relates,
the person giving the undertaking will notify the deposit-taker accordingly; and”.
(6) After subsection (5) of section 482 of that Act there shall be inserted the following subsection—
“(5A) The persons who are to be taken for the purposes of section 481(5)(k)(iii) and subsection (2) above to be the beneficiaries of a discretionary or accumulation trust shall be every person who, as a person falling wholly or partly within any description of actual or potential beneficiaries, is either—
(a) a person who is, or will or may become, entitled under the trust to receive the whole or any part of any income under the trust; or
(b) a person to or for the benefit of whom the whole or any part of any such income may be paid or applied in exercise of any discretion conferred by the trust;
and for the purposes of this subsection references, in relation to a trust, to income under the trust shall include references to so much (if any) of any property falling to be treated as capital under the trust as represents amounts originally received by the trustees as income.”
(7) In section 482(6) of that Act (definitions for the purposes of section 481(5)), in the definition of “appropriate person”, for “as a personal representative in his capacity as such” there shall be substituted “in his capacity as a personal representative or as a trustee of a discretionary or accumulation trust”.
(8) In section 482(11) of that Act (power to make regulations), after paragraph (aa) there shall be inserted the following paragraph—
“(ab) with respect to—
(i) the manner and form in which a notification for the purposes of section 481(5B) is to be given or may be withdrawn, and
(ii) the circumstances in which the deposit-taker is to be entitled to delay acting on such a notification,
and”.
(9) In section 482A(1) of that Act (power to make regulations excluding audit requirements in certain cases), after “United Kingdom” there shall be inserted “, or investments of trustees who are not resident in the United Kingdom,”.
(10) The preceding provisions of this section apply in relation to any payments made on or after 6th April 1996.
(11) Notwithstanding the repeal of section 67 of the Taxes Act 1988 by the [1994 c. 9.] Finance Act 1994 or anything contained in the transitional provisions relating to that repeal, where—
(a) this section has effect so as to require any deposit made before 6th April 1996 to be treated in relation to payments made after a time falling before 6th April 1998 as a relevant deposit for the purposes of section 480A(1) of the Taxes Act 1988, and
(b) section 67(2) of that Act does not otherwise apply in relation to the liability to deduction of tax that begins at that time,
section 67(1) of the Taxes Act 1988 shall apply in respect of payments made before that time as if the deposit were a source of income that the trustees in question ceased to possess at that time.
(12) An officer of the Board may, by notice to any of the trustees of a trust, require the trustees to provide the Board with the following, that is to say—
(a) information about any notification given by any of the trustees for the purposes of subsection (5B) of section 481 of the Taxes Act 1988; and
(b) such information as the Board may reasonably require for the purposes of themselves giving a notification under that subsection with respect to any income arising to the trustees;
and section 98 of the Management Act (penalties in respect of special returns) shall have effect with a reference to this subsection inserted at the end of the first column of the Table.
(13) Where a notice given by the Board before the passing of this Act requires any such information as is mentioned in subsection (12) above to be provided to the Board, and the period within which that information was required to be so provided does not expire until at least one month after the passing of this Act, that notice shall have effect as if given after the passing of this Act in accordance with that subsection.
(14) Without prejudice to section 20(2) of the Interpretation Act 1978 (references to other enactments) and subject to any provision to the contrary made in exercise of any power to make, revoke or amend any subordinate legislation, the enactments and subordinate legislation having effect, apart from this section, in relation to any provisions of the [1978 c. 30.] Taxes Act 1988 amended by this section shall be assumed, in cases where this section applies, to have the corresponding effect in relation to those provisions as so amended.
(15) In this section “subordinate legislation” has the same meaning as in the [1978 c. 30.] Interpretation Act 1978.
(1) In subsection (2) of section 209 of the Taxes Act 1988 (meaning of “distribution” for the purposes of the Corporation Tax Acts), after paragraph (d) there shall be inserted the following paragraph—
“(da) any interest or other distribution out of assets of the company (“the issuing company”) in respect of securities issued by that company which are held by another company where—
(i) the issuing company is a 75 per cent. subsidiary of the other company or both are 75 per cent. subsidiaries of a third company, and
(ii) the whole or any part of the distribution represents an amount which would not have fallen to be paid to the other company if the companies had been companies between whom there was (apart from in respect of the securities in question) no relationship, arrangements or other connection (whether formal or informal),
except so much, if any, of any such distribution as does not represent such an amount or as is a distribution by virtue of paragraph (d) above or an amount representing the principal secured by the securities;”.
(2) In paragraph (e) of that subsection—
(a) for “paragraph (d)” there shall be substituted “paragraph (d) or (da)”; and
(b) sub-paragraphs (iv) and (v) (distribution in respect of securities of subsidiaries of non-resident companies etc.) shall be omitted;
and, in subsection (3) of that section, for “subsection (2)(d)” there shall be substituted “subsection (2)(d), (da)”.
(3) After subsection (8) of that section there shall be inserted the following subsections—
“(8A) For the purposes of paragraph (da) of subsection (2) above subsections (2) to (4) of section 808A shall apply as they apply for the purposes of a special relationship provision such as is mentioned in that section but as if—
(a) the references in those subsections to the relationship in question were references to any relationship, arrangements or other connection between the issuing company and the other company mentioned in sub-paragraph (ii) of that paragraph; and
(b) the provision in question required no account to be taken, in the determination of any of the matters mentioned in subsection (8B) below, of (or of any inference capable of being drawn from) any other relationship, arrangements or connection (whether formal or informal) between the issuing company and any person, except where that person—
(i) has no relevant connection with the issuing company, or
(ii) is a company that is a member of the same UK grouping as the issuing company.
(8B) The matters mentioned in subsection (8A)(b) above are the following—
(a) the appropriate level or extent of the issuing company’s overall indebtedness;
(b) whether it might be expected that the issuing company and a particular person would have become parties to a transaction involving the issue of a security by the issuing company or the making of a loan, or a loan of a particular amount, to that company; and
(c) the rate of interest and other terms that might be expected to be applicable in any particular case to such a transaction.
(8C) For the purposes of subsection (8A) above a person has a relevant connection with the issuing company if he is connected with it within the terms of section 839 or that person (without being so connected to the issuing company) is—
(a) an effective 51 per cent. subsidiary of the issuing company; or
(b) a company of which the issuing company is an effective 51 per cent. subsidiary.
(8D) For the purposes of subsection (8A) above any question as to what constitutes the UK grouping of which the issuing company is a member or as to the other members of that grouping shall be determined as follows—
(a) where the issuing company has no effective 51 per cent. subsidiaries and is not an effective 51 per cent. subsidiary of a company resident in the United Kingdom, the issuing company shall be taken to be a member of a UK grouping of which it is itself the only member;
(b) where the issuing company has one or more effective 51 per cent. subsidiaries and is not an effective 51 per cent. subsidiary of a company resident in the United Kingdom, the issuing company shall be taken to be a member of a UK grouping of which the only members are the issuing company and its effective 51 per cent. subsidiaries; and
(c) where the issuing company is an effective 51 per cent. subsidiary of a company resident in the United Kingdom (“the UK holding company”), the issuing company shall be taken to be a member of a UK grouping of which the only members are—
(i) the UK holding company or, if there is more than one company resident in the United Kingdom of which the issuing company is an effective 51 per cent. subsidiary, such one of them as is not itself an effective 51 per cent. subsidiary of any of the others, and
(ii) the effective 51 per cent. subsidiaries of the company which is a member of that grouping by virtue of sub-paragraph (i) above.
(8E) For the purposes of subsections (8C) and (8D) above section 170(7) of the 1992 Act shall apply for determining whether a company is an effective 51 per cent. subsidiary of another company but shall so apply as if the question whether the effective 51 per cent. subsidiaries of a company resident in the United Kingdom (“the putative holding company”) include either—
(a) the issuing company, or
(b) a company of which the issuing company is an effective 51 per cent. subsidiary,
were to be determined without regard to any beneficial entitlement of the putative holding company to any profits or assets of any company resident outside the United Kingdom.
(8F) References in subsections (8D) and (8E) above to a company that is resident in the United Kingdom shall not include references to a company which is a dual resident company for the purposes of section 404.”
(4) In section 212 of that Act (exceptions from the definition of a “distribution” for certain interest and other payments)—
(a) in subsection (1), in paragraph (b), after “within” there shall be inserted “paragraph (da) of section 209(2) or”;
(b) in subsection (3)—
(i) at the beginning there shall be inserted “Without prejudice to subsection (4) below,”; and
(ii) at the end there shall be inserted “and does not apply in relation to any interest or distribution falling within section 209(2)(da) if that interest or distribution is otherwise outside the matters in respect of which that company is within the charge to corporation tax.”; and
(c) after subsection (3) there shall be inserted the following subsection—
“(4) Where any interest or other distribution is paid to a charity (within the meaning of section 506) or to any of the bodies mentioned in section 507, the interest or distribution so paid shall not be a distribution for the purposes of the Corporation Tax Acts if it would otherwise fall to be treated as such a distribution by virtue only of paragraph (da) of section 209(2).”
(5) In section 710(3)(a) of that Act (meaning of securities), for “section 209(2)(e)(iv) or (v)” there shall be substituted “section 209(2)(da)”.
(6) In paragraph 5(5) of Schedule 4 to that Act (deep discount securities), for “section 209(2)(d)” there shall be substituted “section 209(2)(d), (da)”.
(7) This section has effect, subject to subsection (8) below, in relation to any interest or other distribution paid on or after 29th November 1994.
(8) This section shall not have effect in relation to any interest or other distribution paid before 1st April 1995 in respect of any security if the security is one in the case of which a notice given before 29th November 1994 under Regulation 2(2) of the [S.I. 1970/488.] Double Taxation Relief (Taxes on Income) (General) Regulations 1970 was in force immediately before 29th November 1994 as regards payments of interest or other distributions made in respect of that security.
(1) In sections 63 to 66 of the [1993 c. 34.] Finance Act 1993 (deemed periodic disposal of certain debts), for “the resident company”, wherever occurring, substitute “the creditor company”.
(2) After section 62 of that Act insert—
In sections 63 to 66 below as they apply by virtue of section 61 above—
(a) “the creditor company” means the company identified in subsection (1) of that section as the person entitled to the debt (referred to there as “the resident company”); and
(b) “the commencement date” means 1st April 1993.”.
(3) In section 63 of that Act, omit subsection (12) (meaning of “commencement date”).
(4) The above amendments shall be deemed always to have had effect.
(5) Anything done before the passing of this Act under or by reference to the provisions of sections 63 to 66 of the Finance Act 1993 as originally enacted shall have effect as if done under or by reference to those provisions as amended by this section.
(1) A debt is a qualifying debt for the purposes of sections 63 to 66 of the [1993 c. 34.] Finance Act 1993 (deemed periodic disposal of certain debts) at any time if, at that time, the person entitled to the debt is a company which—
(a) is resident in the United Kingdom, and
(b) is an associated company of a company (whether or not itself resident in the United Kingdom) which carries on a banking business in the United Kingdom,
and the debt is not an exempted debt as defined by the following provisions.
(2) A debt is an exempted debt for those purposes at any time if at that time it is held by the company entitled to it for the purposes of long term insurance business.
(3) A debt is an exempted debt for those purposes at any time if each of the first, second and third conditions mentioned below—
(a) is fulfilled at that time,
(b) has been fulfilled throughout so much of the period of the debt as falls before that time, and
(c) is likely to be fulfilled throughout so much of that period as falls after that time.
(4) The first condition is that the terms of the debt provide that any interest carried by it shall be at a rate which falls into one, and one only, of the following categories—
(a) a fixed rate which is the same throughout the period of the debt,
(b) a rate which bears to a standard published rate the same fixed relationship throughout that period, and
(c) a rate which bears to a published index of prices the same fixed relationship throughout that period.
(5) The second condition is that those terms provide for any such interest to be payable as it accrues at intervals of 12 months or less.
(6) The third condition is that the terms of the debt are not such—
(a) in the case of a debt on a security, that the security is a deep discount or deep gain security, or
(b) in any other case, that if the debt were a debt on a security it would be a deep discount or deep gain security.
In this subsection “deep discount security” has the same meaning as in Schedule 4 to the Taxes Act 1988 and “deep gain security” has the same meaning as in Schedule 11 to the [1989 c. 26.] Finance Act 1989, disregarding paragraph 1(4)(c) of that Schedule.
(7) In this section—
“associated company” shall be construed in accordance with section 416 of the Taxes Act 1988;
“long term insurance business” means insurance business of any of the classes specified in Schedule 1 to the [1982 c. 50.] Insurance Companies Act 1982; and
“published index of prices” means the retail prices index or any similar general index of prices which is published by, or by an agent of, the government of any territory outside the United Kingdom.
(8) In sections 63 to 66 of the [1993 c. 34.] Finance Act 1993 as they apply by virtue of this section “the creditor company” means the company identified in subsection (1) above as the person entitled to the debt.
(9) In sections 63 to 66 of the [1993 c. 34.] Finance Act 1993 as they apply by virtue of this section “the commencement date” means—
(a) in relation to a debt not falling within subsection (10) below, 29th November 1994; and
(b) in relation to a debt falling within that subsection, 1st April 1996.
(10) A debt falls within this subsection if the person liable for it is—
(a) an institution which is a higher education institution for the purposes of section 65 of the Further and Higher Education Act 1992 or Article 30 of the [1992 c. 13.] Education and Libraries (Northern Ireland) Order 1993,
(b) an institution which is an institution within the higher education sector for the purposes of the [1992 c. 37.] Further and Higher Education (Scotland) Act 1992, or
(c) a registered housing association within the meaning of the Housing Associations Act 1985 or Part II of the [1985 c. 69.] Housing (Northern Ireland) Order 1992,
and that person was so liable at the end of 28th November 1994.
(1) In Chapter VI of Part IV of the Taxes Act 1988 (provisions relating to the Schedule D charge: discontinuance, &c.), after section 109 insert—
(1) Where in connection with a trade, profession or vocation formerly carried on by him which has been permanently discontinued a person makes, within seven years of the discontinuance, a payment to which this section applies, he may, by notice given within twelve months from the 31st January next following the year of assessment in which the payment is made, claim relief from income tax on an amount of his income for that year equal to the amount of the payment.
(2) This section applies to payments made wholly and exclusively—
(a) in remedying defective work done, goods supplied or services rendered in the course of the former trade, profession or vocation or by way of damages (whether awarded or agreed) in respect of any such defective work, goods or services; or
(b) in defraying the expenses of legal or other professional services in connection with any claim that work done, goods supplied or services rendered in the course of the former trade, profession or vocation was or were defective;
(c) in insuring against any liabilities arising out of any such claim or against the incurring of such expenses; or
(d) for the purpose of collecting a debt taken into account in computing the profits or gains of the former trade, profession or vocation.
(3) Where a payment of any of the above descriptions is made in circumstances such that relief under this section is available, the following shall be treated as sums to which section 103 applies (whether or not they would be so treated apart from this subsection)—
(a) in the case of a payment within paragraph (a) or (b) of subsection (2) above, any sum received, by way of the proceeds of insurance or otherwise, for the purpose of enabling the payment to be made or by means of which it is reimbursed,
(b) in the case of a payment within paragraph (c) of that subsection, any sum (not falling within paragraph (a) above) received by way of refund of premium or otherwise in connection with the insurance, and
(c) in the case of a payment within paragraph (d) of that subsection, any sum received to meet the costs of collecting the debt;
and no deduction shall be made under section 105 in respect of any such sums.
Where such a sum is received in a year of assessment earlier than that in which the related payment is made, it shall be treated as having been received in that later year and not in the earlier year; and any such adjustment shall be made, by way of modification of any assessment or discharge or repayment of tax, as is required to give effect to this subsection.
Finance Act 1995